Both companies have been grappling with declining sales as more people quit smoking or switch to e-cigarettes.
Altria Inc.’s stock soared more than 8% Tuesday before surrendering those gains, while shares of Philip Morris International Inc. fell 8%, after the latter confirmed speculation that the two are in talks on a potential merger of equals that would reunite them after more than 10 years apart.
Herzog wrote in a note to clients that the reasons a deal is now more likely include that Altria looks more attractive because of its Juul stake, as Juul would make a strong partner for Philip Morris given its dominance of the U.S. e-cigarette and vapor market and its international ambitions.
Read now: FDA warns teens against ‘epidemic of addiction’ — amid revelation that Juul representatives visited high schoolsThe March ban came after an FDA crackdown spearheaded by former commissioner Scott Gottlieb, who threatened to fully ban pod-based vaporizers such as Juul’s if underage vaping were to continue to increase. Gottlieb has described the popularity of the devices as an epidemic, a characterization that has been echoed by the U.S. Surgeon General.
Don’t miss: Teens can spend $1,000 a year on vaping — and the crackdown on Juul is making it more expensive “We think the combination makes sense for Altria given ongoing sales declines and heightened regulatory scrutiny covering tobacco and e-cigarettes in the U.S., as the number of states with laws raising their minimum tobacco purchase age to 21 now covers over 50% of the U.S. population,” he wrote in a note.
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